The Way the CPI Cheats Social Security Recipients and How to Fix It

[What Would Jesus Do?]

We are using the wrong formula to determine whether or not seniors receive accurate COLAs that reflect their financial realities. Currently, Social Security uses the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which takes into greater account factors such as transportation and fuel prices, apparel, and education that disproportionately affect younger Americans. There was a nearly 30 percent drop in gas prices in the past year which directly impacts the CPI-W but primarily affects younger citizens.The truth is that the consumption patterns of seniors are very different from those of younger people. The CPI does not adequately take into account the expenditures of retirees, most glaringly healthcare and housing costs. That is why we need to be using the CPI-E, or CPI for the Elderly (CPI-E). The CPI-E is the most accurate and sensible measure of the real costs that retired Americans face.

From December 1982 through December 2011, the CPI-E rose at an annual average rate of 3.1 percent, compared with increases of 2.9 percent for both the CPI-U and the CPI-W. This indicates that the elderly have been losing purchasing power at the rate of roughly 0.2 percentage points per year by federal retirement programs not using the CPI-E.

To leave the nearly 65 million American retirees who rely on Social Security benefits, including eight million who collect Supplemental Security Income, hanging out to dry is inexcusable.

Social Security prevents approximately 26 million seniors from falling below the poverty line each year. When one is on a fixed income – that right now is a mere $14,000 per year on average – dealing with the ever-increasing costs of healthcare, prescriptions, and housing creates a situation that breaks the promises made 80 years ago when Social Security began.

In contrast to the recent no-COLA announcement, if we use the CPI-E, internal information from the Bureau of Labor Statistics shows that seniors would receive a 0.6 percent increase in the coming year. Furthermore, it would affect the years to come. Since next year’s COLA calculations will still be affected by the decline of CPI-W in the third quarter of 2015, we expect a small or zero COLA again in 2017. Furthermore, proposals to use a chained CPI could mean that we will see actual decreases.

Let us say that again: Using the CPI-E would give seniors a COLA in 2016, and could prevent further, unfair, and inaccurate adjustment in the future.

When there is a commonsense solution that will work RIGHT NOW, we must take action. We have a viable standard at our fingertips to ensure that seniors’ benefits do not diminish over time. We only need the collective will to act.

This year marks the 80th anniversary of Social Security, a true success story for millions of Americans. But now, we need people to stand up and call on government to honor the promise of Social Security by using the correct and fair formula for determining their benefits. Decisions like this will have a lasting impact on the lives of seniors now and in the future.

We have promised our older Americans a safe and stable retirement, and it is up to us to honor that promise. Eighty years ago, we came together, and we must come together now, as President Franklin Delano Roosevelt said, “to place the security of the men, women and children of the Nation first.” We have an opportunity and the moral responsibility to do the same now, and the very first, proven step we must take is to implement the CPI-E to accurately and fairly calculate benefits for American retirees.

http://thehill.com/blogs/congress-b...erly-is-most-accurate-measure-for-calculating

 

[NoleSoup4U]

But I've been consistently told here, and in other places, that there is no inflation. Usually be "liberal" minded people who want more government spending.

 

[What Would Jesus Do?]

But I've been consistently told here, and in other places, that there is no inflation. Usually be "liberal" minded people who want more government spending.

No. What you have repeatedly had pointed out to you is that QE has not turned us into the Weimar Republic.

Many of us who are more rational about this than you have nevertheless pointed out that the government numbers showing little or no inflation are cooked. They aren't cooked in huge ways but they are cooked in ways that hurt certain demographics.

This thread is about one of those ways of cooking the inflation numbers and one of the demographics that is hurt by it.

Would you care to discuss the topic or are your usual bumperstickers all you've got?

 

[NoleSoup4U]

No. What you have repeatedly had pointed out to you is that QE has not turned us into the Weimar Republic.

Many of us who are more rational about this than you have nevertheless pointed out that the government numbers showing little or no inflation are cooked. They aren't cooked in huge ways but they are cooked in ways that hurt certain demographics.

This thread is about one of those ways of cooking the inflation numbers and one of the demographics that is hurt by it.

Would you care to discuss the topic or are your usual bumperstickers all you've got?

I never called us the Weimar Republic because I know that we have the power of the world's currency behind us, and that has nothing to do with what I posted anyways. If you want to help out poor people, maybe you should write your Congressman about reigning in the spending, not trying to add to it.

 

[The Tradition]

I didn't read all that but I agree. Seniors got cheated out of a COLA because gas prices have crashed, but seniors don't spend near as much as average people on gas. Had the COLA index been weighted on the cost of food, rent, healthcare, drugs, and the other stuff that seniors actually buy, they would have gotten an increase.

 

[Pheidippides]

The CPI hides from view the inflation that allows us to inflate our debt away. It's been revised numerous times over the years always in an attempt to hide true inflation. The only alternative is to raise taxes or cut spending which will never, never happen.

 

[What Would Jesus Do?]

The CPI hides from view the inflation that allows us to inflate our debt away. It's been revised numerous times over the years always in an attempt to hide true inflation. The only alternative is to raise taxes or cut spending which will never, never happen.

That, of course, is the "good" side of inflation - the ability to inflate away some debt. But that is only an acceptable approach if sufficient care is taken to protect the vulnerable.

The current CPI-W fails in that task. It may well fail for nearly everybody, but it most assuredly fails for people living on low fixed incomes. From what I've read, the CPI-E would be better for seniors. Better in both senses: more accurate, and averting harm more effectively.

Worse would be going to a chained CPI. Which is something the GOP wants and which the craven Obama has signaled he will accept as part of a compromise.